Correlation Between Microsoft and Amplify ETF

Can any of the company-specific risk be diversified away by investing in both Microsoft and Amplify ETF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Amplify ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Amplify ETF Trust, you can compare the effects of market volatilities on Microsoft and Amplify ETF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Amplify ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Amplify ETF.

Diversification Opportunities for Microsoft and Amplify ETF

0.46

Correlation Coefficient

Microsoft  Amplify ETF

Very weak diversification

The 3 months correlation between Microsoft and Amplify is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Amplify ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify ETF Trust and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Amplify ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify ETF Trust has no effect on the direction of Microsoft i.e., Microsoft and Amplify ETF go up and down completely randomly.

Pair Corralation between Microsoft and Amplify ETF

Given the investment horizon of 90 days Microsoft is expected to generate 12.16 times more return on investment than Amplify ETF. However, Microsoft is 12.16 times more volatile than Amplify ETF Trust. It trades about 0.07 of its potential returns per unit of risk. Amplify ETF Trust is currently generating about 0.2 per unit of risk. If you would invest  41,064  in Microsoft on October 6, 2024 and sell it today you would earn a total of  1,271  from holding Microsoft or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Amplify ETF Trust

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Amplify ETF Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amplify ETF Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Amplify ETF is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Microsoft and Amplify ETF

The main advantage of trading using opposite Microsoft and Amplify ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Amplify ETF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Amplify ETF will offset losses from the drop in Amplify ETF's long position.

The idea behind Microsoft and Amplify ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.